Do taxpayers want tax cuts in the Budget? The answer is bound to be a resounding yes. However, a survey by economictimes.com reveals that barely 18% of the respondents want a taxpayer-friendly budget.

A large majority of the 1,643 respondents prefer a balanced legislation that broadens the tax net but doesn't raise taxes. A small percentage is even willing to make sacrifices that may help rein in the fiscal deficit. On the other hand, the financial services industry has prepared a long wishlist on behlf of the taxpayers.

Life insurance is crucial, but its penetration in India is very low. Insurers feel tax incentives could change this. "A separate deduction of Rs 1.5 lakh for life insurance premiums within an enhanced limit of Rs 3 lakh under Section 80C will help increase the penetration and mobilise long-term funds for infrastructure," says Rajesh Sud, managing director and CEO, Max Life Insurance. "It will also help channelise savings into financial instruments as against non-productive investments like gold," says TR Ramachandran, CEO and managing director, Aviva India. However, few taxpayers look at it this way.

If the savings limit under Section 80C is raised by Rs 50,000, a significant 21.1% want it earmarked for retirement, while only 6.6% want it reserved for life insurance. "A separate deduction for certain pension funds will encourage people to save for retirement, which is an urgent social necessity," says Sandeep Ghosh, MD and CEO, Bharti AXA Life Insurance. Of course, 44.4% don't want the government to interfere in their choices.

Higher deduction and exemption

An overwhelming 94.2% of the respondents want the basic exemption limit to be raised. Nearly half of these want it to be linked to the inflation rate and automatically raised every year. "The minimum exemption limit should be raised to Rs 5 lakh, if not more," says Divya Baweja, senior director, Deloitte India. That's a tall order, and could possibly take 90% of taxpayers out of the tax net, besides reducing the revenue collection by over 10%. We doubt Finance Minister P Chidambaram will agree to this.

On the other hand, there are some exemptions and deductions that need to be reviewed. "The Rs 15,000 exemption for medical allowance was last revised in 1999-2000. Healthcare costs have appreciated substantially since then. The limit should be revised to Rs 50,000 a year," suggests Sonu Iyer, partner, Ernst & Young. In the same context, insurers want bigger breaks for health insurance premiums. Manasije Mishra, CEO, Max Bupa Health Insurance, says the premium for senior citizens should be fully deductible without any limits. As he puts it, "They have a greater need for healthcare."

Iyer says the exemption limit of transport allowance should also be revised. "The limit of Rs 800 per month was fixed in 1998. In the meantime, the price of petrol has shot up three times—from Rs 22.84 per litre in 1997 to Rs 67.26 per litre now," she says.

Similarly, the exemption for education allowance is pegged at Rs 100 per month per child for a maximum of two children. "Given the current education costs, this exemption limit is very low and needs substantial revision," says Baweja.

Incentives on home loans

The marginal dip in home loan rates after the recent RBI revision is unlikely to attract buyers. A bigger tax break on home loans is what they need. "The cap of Rs 1.5 lakh deduction for interest repayment and inclusion of principal repayment in Sec 80C does not favour a first-time home buyer. The ceiling should be raised and principal repayment given a separate limit," suggests Nitin Vyakaranam, CEO, Arthayantra.